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(Update) Britain’s markets tipped down in late Thursday trade as oil giant BP (BP.L) agreed to pay £2.8 billion ($4.5 billion) in criminal damages, the largest penalty in history, for the Deepwater Horizon oil spill in the Gulf of Mexico.

Two workers will also face manslaughter charges related to the 2010 spill in which 11 workers died, and the company is expected to plead guilty to obstruction for lying to Congress about the size of the leak.

Shares slipped 0.35p, or 0.08%, to 425p at the close of Thursday trade. The company had earmarked £24 billion ($38.1 billion) to cover damages, and will be able to pay the fine over five years.

Britain’s FTSE 100 lost 0.8% or 43 points, to 5,679 and the Mid-250 index gave up 0.4%, or 51 points, to 11,667.

More grim news awaited the eurozone as the region fell back into recession for the first time in three years as gross domestic product shrank 0.1% in the third quarter.

Economies in the Netherlands, Austria, Spain and Portugal all contracted. Germany’s economy also slowed to 0.2% growth in the three months to September, down from 0.3% in the previous quarter, showing the bloc’s largest economy is also being hit by the sovereign debt crisis.

BP wavers on falling FTSE as investors await US fines

08.41: Investors found no incentive to end their selling spree on Thursday morning, dragging European stock markets lower.

Sitting in the middle of today’s FTSE 100 movers, shares in BP(BP.L) wavered as long-suffering investors steeled themselves for resolution of the criminal investigation into the 2010 Gulf of Mexico disaster.

Fiscal cliff and geopolitical uncertainty

Concerns over the ability of politicians in the US to avoid a fiscal cliff continued to weigh on markets, after president Barack Obama, in his first press conference since re-election, held to his position that marginal tax rates will have to rise to tackle the nation's deficits.

Renewed concerns over conflict in the Middle East gave investors more reason to temper any enthusiasm.

Asian shares mostly fell after Xi Jinping was, as expected, named as the new leader of the communist party of China as part of a seven strong leadership team that has been reduced from the previous nine.

China watchers were concerned that fewer reformist candidates had been elected to the powerful Politburo Standing Committee than had been hoped, with some labelling it a ‘conservative victory’.

However, others noted that the conclusion of the Party’s once-in-a-decade leadership would at least provide certainty for investors, while reforms – which stalled in the run up to the Party congress when stability was more desired than ever – can now speed up.

They pointed to Xi’s acceptance speech in which he focused on the need for reforms to reduce the corruption which is said to be rife among China’s political classes.

Britain’s FTSE 100 dropped by 0.5% in early trade to 5,691, with similar declines across other European markets.

Weighing on UK sentiment in particular was a warning from Moody’s that the UK’s AAA credit rating faces a downgrade within the next four months if the economy dips sharply again.

‘Despite the UK's clear political commitment to fiscal consolidation, the weaker macroeconomic environment will create headwinds for revenue growth and increase the risk that the country's debt metrics will not stabilise within the next three to four years,’ said Moody’s in its annual UK credit report.

Miners and banks lead sell-off

Miners, banks and insurance companies hustled for places at the bottom of London’s benchmark index, with Resolution the biggest faller, down 3.9% to 230p. Randgold(RRS.L) fell by 2.6% to 6,400p, while Fresnillo(FRES.L) was off by 1.5% to 1,905p.

Banks Lloyds(LLOY.L), Barclays(BARC.L) and Royal Bank of Scotland(RBS.L) fell by around 1.5% to 45p, 234p and 274p respectively, as usual hit especially hard by the weak sentiment. Bank investors also learnt that the banker remuneration is back in the headlines; according to a report in the Financial Times the FSA’s Andrew Bailey has warned the banks that this year’s bonuses must reflect the mis-selling and market manipulation scandals that have damaged the sector over the past year.

BP faces fine

Investors were poised for news from BP after the energy giant announced that it was in advanced discussions with the US authorities over claims against the company for its role in the Deepwater Horizon incident from which its shares still haven’t recovered.

Several news reports quoted sources saying that the fine would amount to the largest criminal penalty in US history. Investors will at least welcome the certainty of the fine being announced however, adding to relief after BP recently struck a deal to offload its stake in TNK-BP.

Gordon Gray, an analyst at Canaccord Genuity, noted that a deal would not cover a string of other federal, state and private claims. He said: 'We think a figure for total settlement costs of $15-20bn – as mentioned in the press recently - would be taken positively by the market, as it would allow BP to move forward with much greater clarity. However, it does not look like that clarity will be forthcoming yet, as some of the key issues look set to remain unresolved.'

It wasn't long ago that we finished paying off America for the WW2. The fine is just another way for America to continue ripping us off. It seems that Obama is behind it all because of what happened when his Mau Mau grandfather at the end of colonialism in Kenya.

I agree with the above. The US seems to keep fining UK companies, or internationals largely based in Britain. I can't remember now which company was involved with Piper Alpha, but if that was maybe a part US company, maybe we should try to get retrospective damages. Also we should ensure that Google, Apple, Starbucks and all the US companies which hardly pay any tax here are eventually taxed more realistically. I understood that the Revenue could take action in cases of aggressive tax avoidance, even though the companies aren't breaking the law.

We are too busy playing cricket - let's get the baseball bats out to ensure fair play!

Ah, the greedy Yanks, but they have not paid one sou for their 'friendly fire' "accidents" and have no intention of so doing, and that on top of the secrets they 'stole' for nothing in WW2 and exploited thereafter.

On the basis of the number of accidents, they should be paying about £100 bil

Agreed. It looks like Obama is using fines on BP, British Banks and Pharmaceutical companies to fix his fiscal cliff. These fines are much more about politics and legislator grandstanding than about the law. It seems that if a US company is involved the fines and rhetoric are much toned-down...if they are fined at all. This lack of equality before the law goes against the principles of justice, and the World Trade Organisation. It's time that shareholders in these companies started initiating legal action in those high rolling American Courts using the same sort of "no cure; no pay" lawyers who are making a good living out of BP.

Does anyone remember that tragic 'accident' in India called Bhopal? Some 11,000 people died as a result with further fatalities stretching into the future and huge environmental damage.

Perhaps someone of those contributing above can tell me how deep America reached down into its own pockets to compensate all those people and children who died or suffered permanent damage, at the time of the disaster or years afterwards. I have never discovered so far just how many trillions of dollars the US government paid in this instance.

Faith in the USA can be restored when we know that Americans don't shirk their responsibilities - Obama raised his voice to a very high pitch when explaining that BP would be made to pay for the Gulf disaster and honour its responsibilities. For America to do otherwise would mean that it was choosing to shirk its responsibilies laying itself open to a charge of hypocrisy.

BP were horribly negligent and its shareholders will pay for this, not those who were blatantly irresponsible. These will keep all their wealth. But while I empathise with those who suffered loss of earnings from their employments, the environmental damage and the cost to wildlife, yet, I do agree with contributors above that Americans and those of other countries should all be in the same boat, so to speak.

The comment by Paul Eden about American hypocrisy is demonstrated in another area. Because there is black president everything is about their rights, nothing is mentioned about the Sioux Indian claims to the black hills reservation. The Sioux have never accepted the legitimacy of being deprivation of their reservation. Apart from there being different versions of the documentation, the Sioux couldn't read. A some of money that was partly based on the removal of gold from their land was offered to them which today amount, I believe to $1.3 billion, but the Sioux don't want it, they want the land. As money has been offered, it demonstrates that their case has been accepted by the American court/government (they appear to be the same thing in America).